Shareholder Primacy Over Planetary Security
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“My name is Katrina Muscat and I am 23 years old. Like many other young individuals, I have experienced what has come to be known as ‘eco-anxiety’ about the threat to human life caused by climate change. Early in my final year at university, the ‘IPCC Special Report on Global Warming of 1.5°C’ was published, and its conclusions quickly went viral. This report included evidence of a pressing need to reduce the damage being caused by climate-altering activities, such as deforestation and the release of harmful pollutants, in order to avoid the worst effects of climate change. These findings influenced my dissertation research, as I wondered how large multi-national corporations could be made to reduce their disproportionately large contributions to such activities. Although my research led me to conclude that current laws do not go far enough to discourage environmentally damaging corporate behaviour, in the year since I have written this dissertation there has been a massive growth in environmental movements particularly across Europe. Alongside my eco-anxious peers, I am hopeful that the political pressure these movements are creating will lead to improved legislation aimed at effectively protecting our shared environment from corporate exploitation.”
Katrina Muscat - Author
Introduction
This dissertation discusses several ways in which the Companies Act 2006 fails to ensure that UK-listed companies appropriately consider and restrict the negative impacts their activities have on the natural environment. This discussion occurs in the context of an international consensus as to the dangers posed by man-made climate change, as described in the UN’s Intergovernmental Panel on Climate Change’s Special Report for 2018. The pressing need for meaningful change in climate-altering activities is highlighted in this report; this dissertation explains why it is unlikely to be brought about by current legislation.
The first chapter aims to show that, despite efforts by lobby groups to widen the understanding of the ‘corporate purpose’ in law so as to require business-leaders to take corporate decisions with a view to ensuring the least possible harm to – among other things – the natural environment, the Act in its current form continues to permit the pursuit of ‘profits at all costs’ by corporate actors. The second chapter then explores why the brief mentions in the Act of the environment and other ‘stake-holders’ who suffer the external effects of corporate activity are easily ignored by corporate directors within a long-standing culture of the company as a means only to increase shareholder pay-outs. Chapter 3 takes a critical approach to the currently-favoured method of allowing companies to ‘self-regulate’ in regard to corporate environmental performance, identifying key reasons why this is insufficient to bring about the necessary change in corporate environmental behaviour. The final chapter discusses some ways in which legislation in the UK could be altered in order to enforce rather than merely encourage positive changes in corporate activity with regards to the environment.
Since the completion of this dissertation the UK Parliament has passed a motion to declare a Climate Emergency. Campaigners for such a move hoped the highly symbolic declaration would place pressure on the government to enact changes to policies and legislation so as to ensure a drastic reduction in activities contributing to the current rates of climate change. In light of such, this dissertation highlights some ways in which the law as relating to UK-listed companies can be improved to reflect the pressing need for meaningful change.
